Oil prices sink over three percent despite OPEC's output cut extension

Crude prices fell over three percent even as the dollar gave up ground, while the Organization of Petroleum Exporting Countries (OPEC) agreed to extend output cuts for nine more months until March in cooperation with other producers, mainly Russia. 

As of 05:15 GMT, U.S. crude futures due on July 15 fell 3.39% to $49.62 a barrel from the opening of $51.36, while Brent crude futures due on July 15 tumbled 3.15% to $52.26 a barrel from the opening of $53.96, as the dollar index shed 0.05% to 97.19 from the opening of 97.24. 

The deal extension comes after six months of forming an unprecedented coalition of 24 producing countries to cut output by 1.8 million bpd, in an attempt to achieve balance in the markets as global crude inventories remain above five-year averages, while US shale production accelerates. 

Similarly, OPEC's energy ministers said that oversupply in the last three years, resulting from overproduction, won't diminish to five-year averages until the end of 2017 at the earliest, while Saudi energy minister Khalid Al Faleh said that cuts will curb global stocks to five-year averages by the first quarter of 2018.

Otherwise, U.S. president Donald Trump proposed his first budget plan, aiming to cut government spending by $3.6 trillion and balance the budget in the next decade, while proposing to sell half the country's strategic crude reserves, estimated at 687.7 million barrels, in specific locations in Texas and Louisiana.

Trump aims to sell 270 million barrels of U.S. oil reserves in the next decade, which would provide $500 million in the next 2018 financial year, and $16.6 billion in the next decade, while BP started its Quad 204 project in the Northern sea in Britain, expected to produce nearly 130 thousand bpd. 

Similarly, Iran's National Oil Company announced a plan to increase Iranian crude production by 8% by March, 2018, while production will resume from a currently-disabled oil field in Libya by next month, paving the road for current sharp corrections on prices after the recent gains.